The UDCs are characterized by a predominance of primary sector i.e. agriculture, low per capita income, widespread poverty, wide inequality in the distribution of income and wealth, over population, low rate of capital formation, high rate of unemployment, technological backwardness, dualism, etc.

Financial planning is nothing but techniques of planning in which resources are allocated in terms of money

The process of addition to the existing stock of capital is called capital accumulation.

Economic Planning in the widest sense is the deliberate direction by persons-in charge of large resources of economic activity towards chosen ends. - Dalton

Gross National Product is the total total market value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (abroad) minus income of non residents located in that country.

(i) The Second Five Year Plan (1951- 56) aimed at rapid industrialization with particular emphasis on the development of basic and heavy industries.
(ii) It was during the second plan period, the Goverriment embraced the goal of democratic socialism

NIT! Aayog (National Institution for transforming India) was formed on 1st January, 2015 through a Union Cabinet resolution. NITI Aayog is a policy think-tank of the Government of India. It replaced the Planning Commission from 13th August, 2014. The Prime Minister. is the Chairperson of NITIAayog and Union Ministers will be Ex-officio members. The Vice-Chairman of the NITI Aayog is the functional head.
Functions of NITI Aayog
1. Cooperative and Competitive Federalism
2. Shared National Agenda
3. Decentralized Planning
4. Vision and Scenario Planning
5. Network of Expertise
6. Harmonization:
7. Conflict Resolution
8. Coordinating Interface with the World
9. Internal Consultancy
10. Capacity Building
11. Monitoring and Evaluation

1. Sir M. Vishveshwarya (1934) made the first attempt in laying foundation for economic planning in India through his book, "Planned Economy of India". It was a 10 year plan.
2. Jawaharlal Nehru (1938) set-up "National Planning Commission" by a committee but due to the World War II it did not materialize.
3. In 1940,8 leading industrialists of Bombay presented a 15 Year Bombay Plan.
4. In 1944 S. N Agarwal gave the Gandhian Plan focusing on the agriculture and rural economy.
5. M.N. Roy in 1945 drafted People's Plan aiming at mechanisation of agricultural production.
6. In 1950 J.P. Narayan advocated Sarvodaya Plan which was inspired by Gandhian Plan and with the idea of Vinoba Bhave.
7. It gave importance to agriculture, small and cottage industries.
8. After considering all the plans in the same year Planning Commission was set up to formulate Five Year Plan in India by Jawaharlal Nehru.
9. Nehru was the first Chairman of Planning Commission, Government of India.

(i) The cause for vicious circle of poverty is demand and supply.
(ii) On the supply side, the low level of real income leads to low level of saving and investment and to deficiency of capital.
(iii) Deficiency of capital leads to low productivity and back to low income.
(iv) On the demand-side, low level of real income leads to low demand so investment is less, therefore deficiency of capital, low productivity and low income.

Economic development is measured on the basis of four criteria

Gross National Product (GNP):
(i) GNP is the total market value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country.
(ii) GNP is one measure of the economic condition of a country, under the assumption that a higher GNP leads to a higher quality of living, all other things being equal.
GNP per capita:
(i) This relates to increasing in the per capita real income of the economy over the long period
(ii) This indicator of economic growth emphasizes that for economic development the rate of increase in real per capita income should be higher than the growth rate of population.
Welfare:
(i) Economic development is regarded as a process whereby there is an increase in the consumption of goods and services by individuals.
(ii) From the welfare perspective, economic development is defined as a sustained improvement in health, literacy, and standard of living
Social Indicators:
(i) Social indicators are normally referred to as basic and collective needs of the people
(ii) The direct provision of basic needs such as health, education, food, water, sanitation, and housing facilities check social backwardness.

S/N	Basic need	Indicators
1	Health	Life expectancy at birth
2	Education	Literacy signifying primary school enrolment as a percent of the population.
3	Food	Calorie Supply per head
4	Water supply	Infant mortality and percentage of the population with access to potable water
5	Sanitation	Infant mortality and percentage of the population with access to sanitation.

I. Classification on the Basis of Benefit:

BASIS FOR COMPARISON	PLANNING COMMISSION	NITI AAYOG
POWERS	Enjoyed the powers to allocate funds to ministries and state governments.	To be an advisory body or a think-tank. The powers to allocate funds might be vested in the finance ministry.
STATE’S ROLE	States' role was limited to the National Development Council and annual interaction during Plan meetings.	State governments are expected to play a more significant role than they did in the Planning Commission.
MEMBERS	The commission reported to National Development Council that had state chief ministers and lieutenant governors	Governing Council has state chief ministers and lieutenant governors
CHAIR-PERSON	Had deputy chairperson, a member secretary, and full-time members	New posts of CEO, of secretary rank, and Vice-Chairperson. Will also have five full-time members and two part-time members. Four cabinet ministers will serve as ex-o official members.
POLICY FORMULATION	Policy was formed by the commission and states were then consulted about allocation of funds	Consulting states while making policy and deciding on funds allocation. Final policy would be a result of that.
FUNDS ALLOCATION	Had power to decide allocation of government funds for various programs at national and state levels	No power to allocate funds
APPROVAL OF PROJECTS	Imposed policies on states and tied allocation of funds with projects it approved.	NITI is a think-tank and does not have the power to impose policies.

1. Short-term (controlling plans or annual plans) for a period of one year (operation).
2. Medium term plans last 3-7 years but normally 5 years. Related to allocation of financial and physical resources (tactical planning).
3. Long-term (perspective or strategic plans) for 10 to 30 years: To bring structural changes in the economy.
4. Financial planning refers to the technique of planning in which resources are allocated in terms of money
5. Physical planning refers to allocation of resources in terms of men, materials and machinery.
6. Comprehensive plan concerns with the major issues for the whole economy.
7. Partial plan considers only the few important sectors of the economy.
Democratic planning:
1. Planning within democracy.
2. People are associated at every step in the formulation and implementation of the plan.
3. The plan prepared by the Planning Commission can be accepted, rejected or modified by the Parliament.
Totalitarian planning:
1. There is central control and direction of all economic activities.
2. Consumption, production, exchange, and distribution are all controlled by the state.
3. The planning authority decides the target, schemes, allocations, methods and procedures of implementation of the plan.
Centralized planning:
1. The entire planning in under a central planning authority.
2. This authority formulates a central plan, fixes objectives, targets and priorities for every sector.
3. It is planning from̀ above.
Decentralized planning
1. Local organizations and institutions formulate, adopt, execute and supervise the plan.
2. It is called planning from below.
Planning by Direction:
1. There is a central authority which plans, directs and orders the execution of the plan in accordance with pre-determined targets and priorities.
Planning by inducement
1. People are induced to act in a certain way through various monetary and fiscal measures.
2. If the planning authority wishes to encourage the production of a commodity, it can give subsidy to the firms.
Indicative planning:
1. It has been in practice in France since the Monnet Plan of 1947 and in mixed economies.
2. The outline of plan is prepared by the Government.
3. It is discussed with the representatives of private management, trade unions, consumer groups, and experts.
4. The essential function of planning is co-ordination of different economic units.
5. The state provides all facilities to the private sector.
6. The private sector fulfill the targets and priorities.
7. The state does not force the private sector but just indicates the areas of operation and targets to be fulfilled.
Imperative planning (China and Russia):
1. The state is all powerful in preparation and implementation of the plan.
2. The implementation is a matter of enforcement. Policies arc rigid.
3. There is complete control over the entire resources by the state. There is no consumer sovereignty.

Natural Resource:
(i) The existence of natural resources in abundance is essential for development.
(ii) But Japan, though it lacks natural resources imports them and achieves faster rate of economic development with the help of technology.
Capital Formation:
(i) Capital formation refers to the net addition to the existing stock of capital goods which are either tangible (plants, machinery) or intangible (health, education).
(ii) Capital formation helps increase productivity of labour, production and income.
(iii) Advanced techniques of production can be used and leads to better utilization of natural resources, industrialization and expansion of markets which are essential for economic progress.
Size of the Market:
(i) Large size of the market would stimulate production, increase employment and raise the National per capita income.
Structural Change:
(ii) Structural change refers to change in the occupational structure of the economy.
(iii) Any economy is divided into primary secondary and tertiary sector.
(iv) Any economy which is predominantly agricultural remains backward.
Financial System:
(i) Financial system implies the existence of an efficient and organized banking system in the country.
(ii) There should be an organized money market to facilitate easy availability of capital.
Marketable Surplus:
(i) It refers to the total amount of farm output cultivated by farmers over and above their family consumption needs.
(ii) This surplus brings income, raises purchasing power, employment and output in other sectors.
Foreign Trade:
(i) A country with favorable balance of trade is always developed.
Economic System:
(i) A country with free market system enjoys better growth rate compared to controlled economies.